London close: Trade jitters offset positive news on wage front

London stocks finished the Tuesday session slightly lower as UK jobs and wage data was overshadowed by news that China is set to ask the World Trade Organisation for permission to slap sanctions on the US.

The FTSE 100 was down 0.08% or 5.76 points to 7,273.54, while the pound was down 0.1% against the dollar at 1.30139.

Against the euro, sterling was 0.1% weaker at 1.1232 and off an intraday high of 1.1252. Sterling weakened after The Independent cited EU sources according to whom Westminster was "over spinning" recent positive remarks out of Brussels.

Nevertheless, the pound did manage to hold on to most of the gains made after the EU's chief Brexit negotiator, Michel Barnier, said on Monday that a deal was possible in six to eight weeks.

China plans to ask for permission to impose sanctions on the US next week, according to the WTO's meeting agenda. The request - which follows US President Trump's latest threat to impose tariffs on a further $267bn of Chinese goods, on top of the $200bn already planned - relates to non-compliance by the US with a ruling in a dispute over dumping duties.

"This news immediately sparked fears that the next round of trade war-escalation isn’t far off," said Spreadex analyst Connor Campbell.

Also in the headlines, the Treasury announced that Bank of England Governor Mark Carney had accepted extending his mandate at the helm of the Old Lady of Threadneedle Street by seven months through January 2019.

Data released earlier by the Office for National Statistics showed UK wage growth strengthened to a three-year high in the three months to July, but employment increased at a slower rate, with economists seeing little chance of the Bank of England raising rates again soon.

UK average earnings in the three months to July increased 2.6% compared to the same period last year, up from growth of 2.4% a month ago. Economists had expected growth to remain at 2.4%, with the latest CPI reading showing that inflation is currently running at 2.5%.

Excluding bonuses, wage growth accelerated to 2.9% from 2.7% and beating the market's forecast of 2.8%. For the single month of July, pay was up 3.1% on a year ago, a high last seen in July 2015 and the joint highest since 2008.

The ILO unemployment rate remained at 4.0% for the three month period, as expected, though employment increased by just 3,000 to 32.4m compared to the previous 42,000 increase. The small increase, which was due to a fall in the employment of women by 28,000 to 15.23m, dragged down annual growth in employment to 0.8% from 1.0%.

In more timely data, the ONS revealed that in August the claimant count increased by 8,700, down from a revised figure of 10,000 for July. The seasonally adjusted claimant count rate increased to 2.6% from 2.5%.

Oanda's Craig Erlam said moves in the pound in the aftermath of the data were not warranted, after it shot up but then quickly pared gains.

Erlam said the jobs report itself paints a much better picture of the UK economy than many people generally have, with unemployment standing at its lowest since March 1975 and wage growth nearing its highest levels since the financial crisis.

"While these levels are still well below what we were seeing prior to a decade ago, they’re certainly supportive of the Bank of England’s policy of gradually raising interest rates when taken in isolation and the jump in earnings further aids this which is why we saw a bump in sterling. The flip side of this is the one-off factors that are likely contributing to the gains, rather than them being entirely organic and a result of a tight and competitive labour market, not the mention the uncertainty and risk with regards to the outlook."

In corporate news, Elementis slumped even though it cut the up-front price of its acquisition of industrial talc group Mondo Minerals by $100m after the deal was poorly received by investors.

Oil producer Cairn Energy was in the red too as it reported first-half pre-tax losses of £383m, while Anglo American edged higher after saying the value of rough diamond sales at its De Beers unit fell in the seventh cycle of 2018 to $505m from $533m in the sixth.

Imperial Brands and British American Tobacco were under pressure again, amid concerns about the impact that tropical storm Florence might have on key tobacco-growing regions in the US southeast.

Going the other way, equipment rental firm Ashtead was the top gainer after saying it would increase and extend its share buyback plans after a strong first quarter of its financial year.

Retailer JD Sports Fashion jumped after it posted a rise in interim pre-tax profit and revenue despite a "challenging" backdrop.

Sanne Group, the provider of alternative asset and corporate administration services, advanced as it lifted its interim dividend and said it remains confident of meeting full-year expectations despite a drop in half-year profits.

Hilton Food was in the green as it posted a jump in interim profit and revenue, boosted by the first full inclusion of the Seachill business, recovery of the business in Central Europe and further strategic progress in Australia.

In broker note action, BP was initiated at 'buy' and Royal Dutch Shell was started at 'hold' by Berenberg, while JD Wetherspoon was lifted to 'buy' by the same outfit.

Cineworld was upped to 'buy' from 'hold' by HSBC and Premier Oil was upgraded to 'buy' from 'hold' at Investec.

Market Movers

FTSE 100 (UKX) 7,273.54 -0.08%
FTSE 250 (MCX) 20,226.42 -0.16%
techMARK (TASX) 3,450.27 0.18%

FTSE 100 - Risers

Ashtead Group (AHT) 2,398.00p 5.18%
Shire Plc (SHP) 4,342.50p 1.82%
Royal Dutch Shell 'A' (RDSA) 2,458.50p 1.30%
Hargreaves Lansdown (HL.) 2,204.00p 1.29%
Royal Dutch Shell 'B' (RDSB) 2,493.00p 1.24%
Rightmove (RMV) 485.75p 1.20%
Kingfisher (KGF) 265.70p 1.07%
BP (BP.) 544.00p 1.02%
Johnson Matthey (JMAT) 3,503.00p 0.95%
SEGRO (SGRO) 655.00p 0.83%

FTSE 100 - Fallers

Imperial Brands (IMB) 2,608.50p -3.34%
British American Tobacco (BATS) 3,554.50p -2.71%
Fresnillo (FRES) 794.00p -2.26%
Pearson (PSON) 866.60p -2.23%
Evraz (EVR) 467.00p -1.91%
Ocado Group (OCDO) 955.00p -1.79%
easyJet (EZJ) 1,394.00p -1.76%
Tesco (TSCO) 236.80p -1.50%
Randgold Resources Ltd. (RRS) 4,652.00p -1.46%
Associated British Foods (ABF) 2,227.00p -1.33%

FTSE 250 - Risers

JD Sports Fashion (JD.) 519.20p 6.52%
Sanne Group (SNN) 628.00p 5.72%
Hilton Food Group (HFG) 990.00p 5.32%
Sirius Minerals (SXX) 26.92p 5.16%
Premier Oil (PMO) 120.21p 4.99%
AA (AA.) 117.75p 3.79%
Convatec Group (CTEC) 238.00p 3.07%
TBC Bank Group (TBCG) 1,604.00p 2.43%
CLS Holdings (CLI) 222.50p 2.30%
Coats Group (COA) 82.90p 2.09%

FTSE 250 - Fallers

Sports Direct International (SPD) 340.90p -5.31%
Thomas Cook Group (TCG) 75.15p -3.65%
Renishaw (RSW) 4,926.00p -3.03%
Kier Group (KIE) 924.50p -2.74%
Cairn Energy (CNE) 226.00p -2.67%
UDG Healthcare Public Limited Company (UDG) 665.50p -2.63%
Dunelm Group (DNLM) 510.00p -2.58%
Brewin Dolphin Holdings (BRW) 340.00p -2.58%
Provident Financial (PFG) 632.20p -2.53%
Capita (CPI) 145.30p -2.48%